The U.S. Agency for International Development (USAID) and Grameen Foundation announced a new private-public partnership to support local currency financing to microfinance institutions (MFIs) throughout the developing world. To launch the partnership, the two parties signed a Memorandum of Understanding to formalize the agreement, and entered into a USD 162.5 million join guarantee agreement aimed to help MFIs gain greater access to financing. The twelve-year program is the largest credit guarantee to date under USAID’s Development Credit Authority, and also marks the first time that a non-governmental organization will serve as the facilitator. Grameen Foundation will manage the credit risk of the pool and vet the microfinance institutions who would like to access the funding, while both organizations will issue joint guarantees together. [1]
USAID is a federal government agency that receives overall foreign policy guidance from the Secretary of State [2]. They support long-term and equitable economic growth while advancing the US foreign policy objectives. To encourage financial institutions to lend to creditworthy but underserved borrowers, USAID uses a tool called the Development Credit Authority (DCA) [2]. DCA is used to stimulate lending through the use of partial credit guarantees. These guarantees, which cover up to 50 percent of defaults on loans made by private financial institutions to institutions that work to further the USAID mission. The stated rational is to use financial resources that already exist in developing countries (such as funds held in local financial institutions) to stimulate broad-based development. Since the establishment of DCA in 1999, over 200 partial credit loan and bond guarantees have been granted by USAID. [2][4]
Grameen Foundation, as a non-profit organization with headquarters in Washington, DC, works to replicate the Grameen Bank microfinance model through a global network of partner microfinance institutions. Started in 1976 by Nobel Peace Prize Winner Professor Muhammad Yunus, Grameen Bank serves more than six million poor families with loans, savings, insurance and other services. The MIX Market, the microfinance information clearinghouse, reports that Grameen Foundation has established a global partner network of 55 microfinance institutions in 28 countries. According to the company’s most recent financial statements, as of March 2008, Grameen Foundation had total revenues of USD 21.9 million and total expenses of USD 16.7 million. [3][5] See more Microcapital.org articles on USAID and Grameen Foundation in bibliography items [6]-[9].
By Kenny Kline, Research Associate
Additional Resources:
[1] Grameen Foundation Press Release, “USAID Launches Partnership with Grameen Foundation”
http://www.grameenfoundation.org/resource_center/newsroom/news_releases/…
[2] United States Agency For International Development (USAID)
[3] Grameen Foundation
[4] Microcapital.org, by Zoran Stanisljevic, “USAID signs a USD 16 Million Dollar Loan Agreement with Ethiopian Awash International Bank and Oromiya Cooperative Bank S.C.”
https://www.microcapital.org/microcapital-story-usaid-signs-a-usd-16-mill…
[5] Microcapital.org, by Uyen Tran, “Grameen Foundation of Washington, DC, Google of Silicon Valley, and MTN Ugana Launch Mobile Services for Enterprises in Uganda”
https://www.microcapital.org/microcapital-story-grameen-foundation-of-was…
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